Craft beer sales up, but rate of growth slowed in 2016

1of6Kathryn Holler moves kegs around Thursday, January 5, 2017, at the new brewery Holler Brewing, which opened a few months ago across the street from where all the Super Bowl concerts are going to take place. They're brewing 50 percent more beer to prepare and stockpiling it. ( Karen Warren / Houston Chronicle )Photo: Karen Warren, Staff Photographer

2of65 O'Clock Pils debuted in April 2016 from Saint Arnold Brewing Co. The brewery attributes a recent growth spurt to the success of this and other new beers.Photo: Saint Arnold Brewing Co.

6of6Cans of 8th Wonder beer are on sale at a Total Wine location. Market share for the craft beer segment rose to 12.3 percent last year.﻿Photo: Melissa Phillip, Staff

The number of U.S. breweries continued to expand in 2016, even as sales growth from smaller, independently owned craft breweries slowed during what industry insiders acknowledged was a "challenging" environment.

A record 5,301 breweries, 99 percent of them defined as craft breweries, were in operation at year's end, the Brewers Association, an industry trade group, reported Tuesday. More than 800 breweries of all types opened and fewer than 100 closed during the year.

Market share for the craft segment rose to 12.3 percent, from 12.2 percent a year earlier, after several years of more robust increases, the Brewers Association said in its annual report. Craft production was up by just 300,000 barrels for the year, to 24.6 million, following at least four years of much bigger increases.

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Craft breweries are defined as independently owned businesses that produce between 15,000 and 6 million barrels a year. Watson said growth rates that strong become harder to achieve over time as industries mature and markets become saturated. Finally, he said, acquisitions by large corporations, including Anheuser-BuschInBev and MillerCoors, have taken several crafts off the Brewers Association's list of U.S. craft breweries.

Last year, for example, that reclassification siphoned off 1.2 million barrels of production that would otherwise have counted toward the craft segment totals. With those barrels added, craft production would have been up 6 percent.

More Information

By the numbers

826 opened; 97 closed

U.S. brewery growth, 2016

5,301, end of year

Combined U.S. brewery count

128,768, up 5.7%

Brewery employment

24.6 million, up 300,000 barrels from 2015

Craft brewery production, by volume

12.3%, up from 12.2%

Craft market share, by volume

$23.5 billion, up 10%

Craft production, by retail sales

21.9%

Craft market share, by retail sales

Source: Brewers Association

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Still, Watson said, the continued increase indicates consumers are still thirsting for fuller-flavored beers regardless of ownership. Craft production has nearly tripled from the 9.1 million barrels brewed in 2009, he said.

In Texas, where the industry developed later than in other U.S. markets, craft brewing continues to do well.

Houston's Saint Arnold Brewing Co., for example, began experiencing an uptick during the fourth quarter after a nearly two-year slowdown, owner Brock Wagner said. He described 2015 and 2016 as "the most challenging years in a decade."

Sales are up 30 percent this year, Wagner said, and he expects the strongest first quarter in the brewery's 23-year history.

Wagner attributed the improvement to several factors, including new packaging across the board, the success of Art Car India pale ale and other beers introduced over the past 18 months and renewed consumer interest in local ownership following recent corporate takeovers.

AB-InBev has acquired nine U.S. craft brands, including Houston's Karbach Brewing Co., and MillerCoors has acquired four, including North Texas' Revolver Brewing. Heineken and Constellation Brands have each acquired one U.S. craft.

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Given such consolidation, Watson said, it's unlikely craft brewing will achieve its "aspirational" goal of 20 percent share of the total beer market by 2020.

"That's a long shot at this point," he said.

Most Americans today live within 10 miles of at least one brewery, the vast majority of them very small.

The current list includes 3,132 microbreweries (59 percent of the total) that each produce no more than 15,000 barrels annually, and 1,916 brewpubs (36 percent), which primarily sell on-site and are therefore similarly small. Those categories were up by 21 percent and 11 percent, respectively, over 2015.

There also are 186 regional craft breweries, or 3.5 percent of the total. Watson cited "mixed performance" by that group and said production was up by less than 1 percent combined.

Watson and Wagner agreed it will be tougher for a new brewery to reach a substantial national presence than it was two decades ago in today's more crowded field.

"Any brewery that will do that has to be truly exceptional," Watson said.

Deputy Business Editor Ronnie Crocker is a veteran Houston Chronicle writer and editor. He's also author of the 2012 book "Houston Beer: A Heady History of Brewing in the Bayou City," which drew on his Houston Chronicle reporting about the Bayou City's burgeoning local industry.

Born in Galveston, raised in Houston and Pearland, Crocker became the first person in his family to earn a college degree - a Bachelor of Arts in journalism from Texas A&M University. He also has an MBA from The College of William and Mary in Williamsburg, Va., but has spent his entire working life as a daily newspaper journalist.